With Brazil’s entrepreneurial ecosystem growing, it’s only natural that the abundance of accelerators in the country is only natural. Each program offers its own strategy and benefits, and those looking to start a business in Brazil won’t find themselves short of opportunities.
I recently had contact with Marcelo Sales, partner and mentor at 21212 Digital Accelerators. 21212 is an organization composed of entrepreneurs and developers looking to impulse the Brazilian digital startup market forward. Its main presences are in Rio de Janeiro and New York.
The accelerator selects classes of 10 startups to undergo four months of acceleration and complete the process with the 21212 Demo Day. The startups chosen receive $R20,000 in exchange for a 10-20% share in the company, which is shared by 21212 and its sponsors. Beyond funding, participants also receive mentoring and training, as well as the opportunity to work with developers, programmers, lawyers, business developers and other professionals vital to sustainability and growth.
Prior to working with 21212, Sales himself was deeply involved in the Brazilian startup ecosystem, having founded a number of entrepreneurial initiatives on his own. Most notable are nTime and Comperantime, which are currently incorporated into Sales’ existing company, Movile.
Today, Sales dedicates his time almost entirely to 21212 and remains as a board member and shareholder of Movile. He works alongside newer startups through strategy, mentoring and networking, making connections through distinct segments and markets and applying them to other businesses.
Sales took some time out to explain a bit about 21212 as well as his outlook on the Brazilian startup ecosystem and technology.
ES: What types of businesses are you most inclined to select for acceleration with 21212? What is your approach to acceleration (funds, networking, mentoring, etc.), and what sets you apart from other accelerators and incubators?
MS: We think Brazil is an amazing market that is ready for companies that have a transaction at the end of the day. That means companies that solve real problems that people want to pay for. The acceleration process includes funding, internal and external mentoring, workshops, legal consulting, and free access to our own team of developers, designers, lawyers and business development executives. We have 16 executives on our staff, who give support to all of the companies. One of the big challenges for startups is having the money to find and hire great talent. During the acceleration process, we actually provide this to them with our staff, trainers, and mentors, which makes 21212 a little different from others accelerators Brazil.
ES: As you’ve been involved in digital technology startups for over a decade, how have you seen technology evolve and change? What has most surprised you, and what do you think we should expect over the next five years?
MS: I think technology will always challenge current business models. In my opinion, that’s fantastic, because it makes you think that five years from now, new companies will arise, sometimes killing old ones, sometimes opening a totally different market of customers and coexisting with current models. I can say that the power of collective buying and crowdfunding is really notable. At the same time, business models like Airbnb, Uber, and Zipcar are reshaping the market. Over the next five years, I believe we can expect more powerful mobile tools, more transparency between buyers and sellers, real time social recommendations, and individual assets being part of niche business models, creating virtually unlimited resources for some startups.
ES: The current viewpoint is that Brazil is a powerful market for digital products; however, in practice and in theory, other Latin American countries – Argentina, Chile, Colombia – are seen as the hubs for technological development and the birthplace of startups. What are your thoughts on this?
MS: I see really good companies coming from Argentina, Colombia, and Chile. At Movile, we have offices in all of these countries, and I am really impressed by the levels great talent we found there. What we might be seeing in these countries are the same effects that we find in Israel because of the size of their inside markets. The mindset of the local entrepreneurs is beginning to go global and embrace technology in order to achieve that.
In Brazil, we still find great companies who want to become the biggest in their state (omg!). Some entrepreneurs think that success is to create a US$10M company. I want to see entrepreneurs who want to create a 10-billion-dollar company. We at 21212 want to work with great minds. It doesn’t matter where they come from, they just need to think big!
ES: Many investors are inclined to inject funds in Brazil into startups that are copycats of models that have been successful in other countries. What’s the logic behind that? Do you think it’s a weakness? Are funds investing in innovative ideas or just in what they know is going to sell?
MS: Investors want big exits, that’s their business. I think the majority of the investors are right when making decisions in Brazil based on their previous successes in other countries. It’s really hard to bet on innovations in a country that doesn’t have a completed ecosystem to support innovation. At the same time, those few true innovations that have a unique market fit in Brazil can bring huge upsides and returns, but they are hard to find, and big funds will always have the opportunity to come later on those deals. For smaller funds, Brazil is an amazing opportunity to acquire a big piece of equity in good companies for a relatively low price compared to similar U.S. models.
ES: There is a lot of money in Brazil right now, but producing in Brazil is also very expensive. Why is that? Does money have less value in Brazil than in other locales? How does this affect the rest of Latin America and work out in other countries in the region?
MS: First, it is important to understand that Brazil has a lot of taxes. That makes it really difficult to hire people and makes everything expensive. So, if you want to hire inside Brazil, finding good talent for a reasonable cost will always be a challenge.
At the same time, technology companies should be using the entire world as a resource for their businesses and not only local talent and suppliers. Today at 21212, we work with Brazilians, Americans, Indians, Germans and Portuguese. It doesn’t matter where you build your product or hire talent. What really matters is if you have a great product with a really good market fit.